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Trading Currency For Yield

Most investors don't realize this but investing is a simple exercise is trading one currency for another. In the foreign exchange market in order to buy a currency you must sell another one in a pair. For example to buy the US Dollar you must sell another currency such as the Euro. The system is built this way because all markets are dynamic and all instruments are relative to each other.

The stock market is another example of this. In the US, we pay US dollars for a share of a public company's stock. In essence you must short the US Dollar and go long the equity of the company you are investing in.

Similarly, a purchase of private stock is the same transaction. Going long the private company's stock and short the US Dollar.

You can take this example on to Real Estate. If you prefer the cash flows of a building more than idle cash, you essentially are going long on Real Estate and short on the US Dollar sitting idle in a bank account.

The reason I am bringing this up is that investors need to understand that purchasing power and money flow to the highest yields. Forex investors know this all too well via carry trades (purchasing high yielding currency while selling low yielding currency).

Whatever it may be that you are selling (public stock, private stock, a product, a service) you need to understand that investors who buy what you are selling are essentially going long what they are buying. And they are going short dollars to make this transaction. They are investing because they expect and demand yield from their purchase.

Knowing this simple fact will enable you to structure transactions that are competitive with other yields available in the market. Similarly, you will be able to provide returns commensurate with expectations. If you want to take it a step further you can do what all investors love - underpromise and overdeliver.